Bahamas Domestic Limited Company

A domestic
resident company limited by shares is usually formed for the
purposes of carrying on local business.

There must be at
least two directors. The company's annual return includes a list of
the members, and is kept on the public register. An annual audit can
be dispensed with, if all shareholders agree. There is no
requirement to file financial statements.

Shares need not have
a par value, and when paid up, need not have distinguishing numbers.
Bearer shares can be issued with exchange control permission.

Bahamas Company Limited by
Guarantee

Under the
Companies Act, a company limited by guarantee must have a
minimum of two members; the Memorandum of Association contains a
statement of the amount up to which the members guarantee the
company's debts. The Articles can provide for the members to
have differing 'shares' of the assets and liabilities.

The Company Limited by Guarantee has
certain advantages, including that there is no list of members
on the annual return, and that control over assets can be
achieved without the use of shares; in some jurisdictions,
profits realised from such companies are classified as capital
gains rather than as income. Specialist advice is required by
anyone considering the use of a company limited by guarantee.

Bahamas Public Company

A public company formed under
the Companies Act is similar to a private company limited by
shares except that there is a compulsory annual audit, and there
must be at least three directors. A list of all officers,
directors and managers of the company must be kept at the
registered office and sent to the Registrar-General along with
the annual return.

Bahamas International Business Company

The International Business
Company is the most widely used vehicle for offshore operations
in the Bahamas; it normally takes the form of a private company
limited by shares. The governing legislation is the
International Business Companies Act 1989, updated by the
International Business Companies (Amendment) Act 1994, the
International Business Companies Act 2001, and the International
Business Companies (Amendment) Act 2004.

Until 2001, there was no need to
register details of beneficial owners, directors or officers,
but under the International Businesses Companies Act 2001 which
came into force at the start of 2001 IBCs are required to submit
their identities, addresses and names of directors and owners to
the Registrar General's Department. Otherwise, statutory
requirements are minimal, and flexible:

Only one director,
who may be corporate, and one shareholder are required;

Shareholders,
directors and officers need not be resident in the
Bahamas and there is no stipulation as to their
nationality;

There is no minimum
capital requirement; shares must be registered and may
be issued in any currency; bearer shares however are no
longer permitted;

Accounts need not be
kept; however, if they are kept there is no requirement
for an audit.

A share register
needs to be kept; it is unclear whether nominee
shareholders are still permitted;

Shareholders and
directors meetings need not be held in the Bahamas and
can be held by telephone;

The Memorandum and
Articles of Association are the only documents to be
held on the public record;

The legislation
contains asset protection clauses against actions
emanating from without the Bahamas; it also contains
provisions for the protection of minority shareholders;

An IBC is exempt from
Bahamian Exchange Control, from stamp duty and from
other taxes and estate duties for 20 years from the date
of incorporation;

an IBC can be managed, controlled
and operated from the Bahamas.

A company incorporated or (if
foreign) registered under the Companies Act 1992 can switch to
IBC status if it qualifies under the legislation.

IBC status is granted subject to
certain conditions:

No business may be transacted with
residents in the Bahamas;

No ownership interest in real
property in the Bahamas is permitted; property may be
leased for office use only;

Banking, insurance or re-insurance
business is not permitted;

Engaging in the business of company
management or providing registered facilities for
Bahamian incorporated companies is not permitted.

IBCs are permitted to own shares
in other Bahamian companies, maintain bank accounts in the
jurisdiction and employ the services of local professionals.

It is obligatory to use a
registered agent in the Bahamas to incorporate an IBC. Fees for
incorporation of an IBC are based on the company's authorised
share capital. Normally, the incorporation process takes no more
than one day.

Statutory incorporation and
annual registration fees are as follows:

Authorised Capital

Incorporation Fee

Annual Fee

Up to $50,000

$330

$350

Over $50,000

$330

$1,000

Amendments to the International
Business Company legislation in 2004 permit the continuation of
an IBC as a Bahamian company under the Companies Act, and enable
an IBC to be licensed as an external insurance company.

Bahamas Limited Duration Company

The International Business
Company (Amendment) Act 1994 introduced the Limited Duration
Company, which is essentially the same as the IBC but with a
life limited to 30 years. This form is directed towards a
certain class of US investors - when suitably structured the LDC
has the characteristics of a partnership and is treated as such
in the US, where it is known as a Limited Liability Company.

Bahamas Foreign Company

A foreign company can operate a
branch in the Bahamas with minimal formality and no registration
requirements, but once the branch is recognised as an 'undertaking'
under the Companies Act 1992, or as a 'trading' branch, it has
to register with the Registrar-General. The following amount to
having 'undertaking' status:

the keeping of a place of business;

the holding of a licence (or the
requirement to hold one) for specified business;

the holding of a licence (or the
requirement to hold one) for selling securities; or

having a local telephone listing.

Registration involves filing a
notarised and legalised copy of the company's Memorandum and
Articles of Association (or its Statutes) and details of the
directors and officers. A Certificate of Registration is issued,
and the company (the branch) then has the same position as a
Bahamian incorporated company, ie it must maintain a local
registered office, etc etc as above.

If the foreign company (branch) intends to
trade within the Bahamas or to employ more than two Bahamians,
it needs to apply to the Bahamas Investment Authority for
clearance from the National Economic Council, and it needs to
obtain the relevant business licence
as does a Bahamian company.

It is open to a qualifying
foreign company, once registered, to become an International
Business Company.

Bahamas Limited Partnership

Bahamian law relating to
partnerships is essentially similar to English law. General or
limited partnerships are allowed.

In a limited partnership there
must be at least one general partner with unlimited liability,
and the limited partners may not take part in management of the
partnership. There must be a written partnership agreement which
must be registered, and one of the general partners must file a
notarised declaration of the sum contributed by the limited
partners.

Partnerships which trade in the Bahamas
need the appropriate
business license, as for limited
companies.

Bahamas Exempted Limited Partnership

The Exempted
Limited Partnership Act (1995) created a partnership form (ELP)
equivalent to the International Business Company, and has the
same limitations on local activity as the IBC (see above). The
structure is the same as for a limited partnership (see above);
a general partner can also be a limited partner, and one of the
general partners must be either a Bahamian resident or a company
incorporated under the Companies Act 1992 or the International
Business Companies Act 1989.

An ELP must be
registered, and the names and addresses of all general partners
must be filed. On issue of the registration certificate, the ELP
becomes exempt for 50 years from exchange controls, from all
forms of taxation, from stamp duty, and from business license
fees. (However, if one of the general partners is a Bahamian
resident, then there may be some exchange control implications).

The initial
registration fee for an ELP is $850, and the continuing annual
fee is $475. An annual declaration must be filed confirming
adherence to the local trading prohibition.

Bahamas Trusts

The trust law of the Bahamas is based on
English trust law, and was codified in the Trustee Act 1893, but
there have been a number of recent statutes which update and
extend Bahamas trust law, particularly the Trustee Act 1998
which repeals the Trustee Act 1983 and the Variation of Trusts
Act Cap 166. The Trust (Choice of Governing Law) Act 1989
protects against forced heirship provisions; the Fraudulent
Dispositions Act 1991 strengthened the position of asset
protection trusts. In early 2004 legislation dealing with
purpose trusts was introduced to the legislature.

Bahamian trusts (other
than those holding Bahamian property) do not have to be
registered, and the 1998 Act disapplies Exchange Control
Regulations to non-resident settlors, donors, beneficiaries and
trustees - therefore it is no longer necessary for trusts to be
registered with the Central Bank as non-resident. This applies
to existing trusts as well as to new ones.

Trusts (other
than those holding Bahamian real estate) with non-resident
beneficiaries are exempt from all taxes, including stamp duty on
transfers into trust.

Under the 1998 Act, new trusts need to be
stamped with a $50 Bahamas revenue stamp, which can be bought
for cash and does not involve any disclosures.

The 1998 Act
provides for the appointment of a 'protector of trust',
effectively a supervisor of the trustee(s), and also managing
and custodian trustees.

A company offering trust services must
obtain a licence under the Banks and Trust Companies Act 1965
and conform to various conditions.

Comprehensive new
Private Trust Companies legislation passed both houses of
parliament in the Bahamas in December 2006. Under the
legislation, a Bahamian PTC, like other structures such as
foundations, does not require regulatory approval. The PTC need
only arrange its affairs with a regulated Bahamian service
provider or Registered Representative.

The legislation
which allows for the formation of Private Trust Companies (PTCs)
is the Banks and Trust Companies Regulation (Amendment) Act,
2006, and the Banks and Trust Companies (Private Trust
Companies) Regulations, 2007.

Under the
legislation this class of trust is defined by reference to the
Designated Person(s). The Designated Person(s) is an
individual(s) who is identified at the establishment of the PTC
and with whom all other settlors of trusts, for whom the PTC
acts as trustee, must be related. With the requirement that the
Designated Persons must be related, and that all other settlors
of trusts, for whom the PTC acts as trustee, must be related,
the PTC can act as Trustee for an unlimited number of trusts and
can benefit anyone (subject to due diligence requirements) from
the assets of the trusts.

Bahamas Foundations

Foundations were
introduced by the Foundations Act 2004 and accompanying
regulations. Such structures are already well-known in Europe,
Latin America and Asia, and the Bahamian foundation is an
important tool for the jurisdiction’s expanding wealth
management capability.

There are no
perpetuity period rules applicable to Bahamian foundations,
which immediately provides for continual unending succession if
it is desired by the founder. A Bahamian foundation is not
subject to forced heirship laws of a foreign jurisdiction.

A Bahamian
foundation is a distinct legal entity which is convenient for
‘proper law’ questions. Assets placed within the foundation are
owned solely by it, and a change in a Bahamian foundation’s
governing body does not change the legal ownership of the
foundation’s assets. There is no statutory requirement for an
external audit unless the foundation’s charter so provides.

A foundation
established in another country may redomicile in the Bahamas;
and a Bahamian foundation may redomicile into another country,
provided such a move is permitted in that country.

While the most
common use of foundations is for estate planning, they are
useful in a number of other areas. They can be used to provide
for subordinated debt; to perpetuate a particular corporate
governance policy; to hold the benefit of warranties for a wider
or changing class of investors; for philanthropic purposes; or
for the separation of voting and economic benefits.

In addition,
foundations allow for investment in family companies whose
economic performance may be poor, for ownership of a private
trust company, for provision of an employee share option scheme,
or for packaging financial instruments into marketable
securities.

The registration
process for a Bahamian foundation is comparable to that of a
company registration, making it a legal entity that must be
filed with the Registrar General of the Bahamas. Like that of a
company, the name of the Bahamian foundation must be reserved at
the Registrar General’s office prior to submission of the
necessary documentation. The registrar will confirm that the
foundation name is valid for use and that the name has been
reserved for a period of 90 days.

Online
registration is available. The fees for the registration of a
Bahamas foundation are: $500 if registered in the first quarter;
$375 if registered in the second quarter; $250 if registered in
the third quarter; and $125 if registered in the fourth quarter.
The foundation’s charter must contain a statement that the value
of the assets of the foundation may not be less than B$10,000,
or the equivalent in any other currency.

Officers of the
foundation must keep proper records and accounts, which can be
inspected by any officer, foundation council member, founder,
auditor or any other supervisory person at any time. However,
confidentiality provisions restrict any person acquiring
information from disclosing such information relating to the
foundation, without the expressed consent from the founder and
the beneficiaries, or as required by law, or a Bahamian court.

Segregated Account Company

A SAC is a
company which is registered under the Segregated Accounts
Companies Act 2004. The SAC may create separate accounts with
assets and liabilities which are segregated from the assets and
liabilities attributable to every other account and also from
the company’s general assets and liabilities.

Key highlights of a SAC:

A segregated account is not a
legal person distinct from the SAC.

A SAC must inform any person with
whom it deals that it is a SAC.

A SAC must identify the
segregated account which is connected to a particular
transaction.

All assets linked by a SAC to a
segregated account shall be held by the company as a separate
fund which will not be part of the general account of the
company but held exclusively for the benefit of the account
owners of the particular segregated account. Those assets will
be available to meet the rights of the account holders and
satisfy the liabilities connected to the particular segregated
account.

The SAC will record what assets
are in its general account and such assets shall be the only assets
of a SAC available to meet the general liabilities of the SAC.
Assets in the general account will not be available to satisfy
liability which is linked to a segregated account.

The rights and obligations of
account owners in a segregated account are contained in a
governing instrument. The governing instrument may provide for
conditions which must be complied with in order for a person to
become a segregated account holder. The governing instrument may
also provide for management of the segregated account,
appointments of one or more managers, and the orderly winding up
of the affairs and termination of the segregated account.

The governing instrument must be
governed by the laws of The Bahamas and the parties to it must
submit to the jurisdiction of the courts of The Bahamas.

The rights and obligations of
counterparties dealing with the SAC are evidenced in the form of
contracts.